Big beer producers caught on the hop

Peter Swann believes the formation of Camra was a key turning point. Photograph: David Sillitoe for the Guardian

Offered a choice between the products of the grape and the hop, Peter Swann admits that he would go for wine every time. But in his capacity as professor of industrial economics at Nottingham University, he has become fascinated by the workings of the brewing industry, and the phenomenal spread of microbreweries in particular, helped in no small measure by tax breaks from Gordon Brown when he was chancellor. The result is a new paper called The Fall and Rise of the Local Brew – a heartening tale, he believes, with implications for other sectors of the economy.

"The lesson here is that the trend towards ever stronger concentrations of production and distribution is not unstoppable," he says. "There are parallels, for instance, with the food industry, where small-scale producers have emerged to meet a growing demand for quality and diversity from more discerning consumers."

With beer, the formation of the Campaign for Real Ale (Camra) in 1971 would eventually prove to be the key turning point, he believes. Camra grew quickly from a gathering of disgruntled drinkers around a pub table to become what "has been described as the most successful consumer pressure group ever formed", Swann says. "It is arguable that Camra was unable to stop the progress of consolidation and standardisation among the largest brewers. But it was very successful in educating an increasing number of beer drinkers about the finer points of 'real ale' and the pleasures of regional diversity."

The number of breweries in England fell from 1,324 in 1900 to 141 in 1975. But by 2004, numbers had risen again to 480 – "roughly the same figure as in 1939," Swann points out. "I don't have figures beyond that but, from what I gather, the number is now closer to 700."

It is not known what percentage of these microbreweries are "hobby businesses", run by two people in a large shed and doing little more than breaking even. But a mile or two down the road from Swann's offices, the fledgling Castle Rock Brewery recently opened a new plant, enabling it to triple its production to meet burgeoning demand after its Harvest Pale was voted champion beer at this year's Great British Beer Festival. The brewery now owns 23 pubs, delivers to over 100 more and has nearly 300 employees.

Its founder, Chris Holmes, was national chair of Camra back in 1975-76, making him a useful source of first-hand information for the professor. At the time, Nottingham bucked the national trend insofar as it had three independent brewers. Many other cities and towns had seen their local brews gulped down and swallowed up by Camra's arch-enemies: the so-called Big Six conglomerates that delivered to the nation's drinkers such delights as Watney's Red Barrel and Double Diamond.

These national brands had come about from the search for economies of scale, Swann reminds us. "Two essential factors that enabled concentration of production were the reduction in transport costs and a technical change in brewing that made the product more easily transportable." Brewery-conditioned beer was biologically "dead", but chemically stable. Unlike real ale, which continues to ferment in the cask, keg beer has been filtered, chilled and pasteurised. It could be stored for much longer and delivered anywhere in the country, where added carbon dioxide would bring it back to some sort of life.

"The reaction to mediocre draught beer during and after the second world war had helped to build the momentum behind national keg brands," Swann points out. "Far from real ale at its best, as we see it today, some draught beers then could be cloudy, full of sediment and unpleasant to drink." Others, though, were highly regarded by their aficionados and it was these smaller, regional companies that Camra set out to champion even as they were disappearing.

The pressure group was perhaps more successful in denigrating brands such as Red Barrel and Double Diamond to the extent that they were eventually boycotted by discerning drinkers. Major brewers reacted by acknowledging real ale as a niche market while moving away from mass-produced and heavily advertised keg ales and into mass produced and heavily advertised keg lager. "These companies spend a lot of money on advertising because it works for them," says Swann. "Who is more likely to buy Carling Black Label [the country's biggest-selling brew] than someone who is responsive to advertising?"

They are not the ones, needless to say, the burgeoning microbreweries are out to woo. "They are targeting consumers who choose something because it's distinctive," Swann confirms. The Big Six, meanwhile, have evolved into even bigger international conglomerates. And major regional brewers have grown fatter by swallowing smaller companies and producing their brands in-house. "They mimic the concept of the 'late configuration centre' used in car plants," Swann explains. "Just as motor companies add on to the same production line features for more expensive models, so the brewers make use of a number of versatile post-fermentation techniques to produce a variety of end-products from a single brewing run."

Of the three independent brewers that existed in Nottingham in the 70s, two have been closed down and the products of another are brewed by Greene King in Bury St Edmonds. But perhaps it's a sign of the times that the city had six microbreweries at the last count, as well as Castle Rock.